Varishtha Pension Bima Yojana: Advantages and Disadvantages

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    Varishtha Pension Bima Yojana was re-launched by Finance Minister Arun Jaitley in the Union Budget 2014-15.

    The scheme is available a limited period from 15th August 2014 to 14th August 2015 for the benefit of citizens aged 60 years and above.

    Under this scheme, the senior citizens would get pension on fixed basis either on yearly or monthly basis which will provide social security to senior citizens.

    Varishtha Pension Bima Yojana: Advantages and Disadvantages

    Here are advantages and disadvantages pertaining to the scheme.

    Advantages of Varishtha Pension Bima Yojana

    • Individuals can take payout in monthly, quarterly, half yearly, yearly manner.
    • Loan facility is available after completion of 3 policy years. The maximum loan that can be granted shall be 75 per cent of the Purchase Price.
    • The amount to be refunded within free look period shall be the Purchase Price deposited by the policyholder after deducting the charges for Stamp duty.
    • There is no waiting period, pension will be disbursed immediately as per your pay out plan.
    • The interest rate applicable for the scheme is at 9.38 per cent per annum on their deposits as they are being paid on monthly basis. This can be a better option in falling interest rate.
    • If the pensioner requires money for the treatment of any critical/terminal illness of self or spouse then the policy can be surrendered before the completion of 15 years and the Surrender Value payable shall be 98% of Purchase Price. 

    Disadvantages of Varishtha Pension Bima Yojana

    • Maximum investment allowed under this scheme is at Rs 6,66,665/- and which will turn out to be Rs 5000/- monthly pension payout which is quite low considering family and inflation.
    • Taxes including Service Tax, if any, will be applicable as per tax laws and the rate of tax as applicable from time to time.
    • There is no tax benefit under Income tax law. 
    • The policy can be surrendered only after completion of 15 years or only under exceptional circumstances. The lock period is so high that it will be very difficult for super senior citizen to make best use of it. 
    • If the interest rates in the prevailing markets are higher than 9.38 per cent, you will be under loss and will not be able to do much about it.

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